FinTechAutomationUsing technology to optimise multi-currency management

Using technology to optimise multi-currency management

Anthony Wood shares how Revolut is facilitating multi-currency management through data accessibility, ML, analytics and automation.

The use of multi-currency is nothing new. People have been travelling overseas and organisations have been expanding for the longest time. The tech industry’s job is to facilitate and help customers address the need for multi-currency payment methods.

Inefficiencies in the market, and a reliance on asymmetric information has made the FX market an easy target, with many tech companies such as Revolut using this as a v0.1 product before expanding into broader banking and payments services.

Using technology to optimise multi-currency management

Tech companies are pushing the banking industry to respond faster than ever to meet customers’ needs. We’ve seen partnerships between FinTechs and Financial Institutions grow from 32% in 2016 to 45% in 2018. 82% of these organisations plan to increase this in the coming years. In order to remain competitive, traditional banks have been forced to reconsider their product offerings, and offer multi-currency accounts that are capable of matching this.

Two of the largest banks in Singapore, DBS and UOB, have launched both retail and business multi-currency accounts in 2017 and 2018 respectively, while OCBC (third largest) has recently launched a product similar to those offered by many FinTechs.

What’s changed in multi-currency management?

Traditionally, banks have relied heavily on manual, error-prone processes, and these costs have been passed on to customers. With tech, there have been a number of changes that have allowed incumbents to quickly come in and undercut their much larger, less nimble counterparts. With the benefit of being unhindered by legacy tech, FinTech companies have been able to transform an inefficient market into something highly competitive, which delivers value for customers like never before.

This transformation is underpinned by 3 core technologies: data accessibility, data-driven decision making, and automation. Moreover, the industry has experienced an overarching change in mindset that is driving more change than ever in the FX industry.

Accessibility of data

The absolute foundation of treasury is data. Every second article you read on treasury will contain a reference to data. In order to reap value from TMS or treasury processes, information must be available, reliable and accurate. At present, many institutions rely on SWIFT messaging as a means of obtaining the bare minimum data. This is already changing. Financial institutions are increasing the availability of APIs to support the growth of their clients.

With the evolution of APIs, we can receive real time exchange rates for any currency pairs, get real-time information on account balances, and treasury departments can use this to make smarter financial decisions. Utilising concepts such as data lakes allows organisations to integrate data from multiple sources/platforms in a way that’s been historically difficult or impossible. At Revolut, we are able to integrate transactions data from our mobile app with SWIFT messages being received from our banking partners, with invoices coming from our partners so that we can plan and optimise our liquidity. With real-time exchange rates, we’re able to hedge against future FX movements and protect ourselves.

Machine learning and analytics

Machine learning algorithms and analytics algorithms are a lot older than you might expect. For example, one of the most powerful algorithms, neural networks, has been around since 1959, when the first real-world application of a neural network was used to eliminate echoes on phone lines (this technology is still used in pockets today).

In the past 3-4 years, other advances in technology infrastructure have commoditised these algorithms, so that there is really no reason not to leverage them. In particular, treasury departments can make use of these algorithms to forecast liquidity, predict and hedge against FX changes and optimise internal processes.

Automation and process orchestration

The most recent stage of evolution in technology has been that of automation and process orchestration. Evolution in technologies such as server virtualisation, self-contained environments and cloud computing has been rapid,  In the past 12 months there has been an explosion in start-ups offering robotic process automation.

In the domain of treasury management, Straight Through Processing is the holy grail, and what every organisation should aspire towards. Automation is already being used in parts of treasury, for example, through a set of in-house-built tools, Revolut has created a platform that limits the amount of FX risk exposure at any point in time in any currency through micro-hedging. Other tools like Kantox are already available on the market and are being used to automate risk hedging at companies like Citibank in the United States.

Product Mindset

If we consider the tech industry as a whole, it is not just the technology itself that is facilitating the growth of multi-currencies. FinTech players like Revolut are bringing a new mindset to the industry that is challenging the status quo.

The extent of this impact is not simply confined to the launch of a fancy mobile app, but is deeply embedded in the culture and mindset of the entire organisation. When your treasury department embraces a product mindset, your team’s focus shifts from executing a process to delivering value to the business and actively measuring and tracking that value. Further, a product mindset empowers your team to find new ways of delivering more value. It is a mindset that focuses on achieving scale, across the globe.

Ultimately, bringing these four trends together has culminated in a reshaping of the FX industry, abolishing asymmetric information to more efficiently meet the needs of customers. Banks and payment companies alike are adapting, and this has facilitated an ever-growing market in FX, not just for travel, but for exposure to other currencies and investment as well.

By Anthony Wood, Revolut.

Falling somewhere between Treasurer and Technologist, Anthony uses data and technology to improve the efficiency of Treasury functions. He currently leads Finance and Treasury Operations in Revolut Singapore and has more than 6 years of experience in Consulting for multiple industries, including Banking, Automotive and Consumer Goods.

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